Treasuries Etf: A Long-Term, Safe Investment Strategy

how to invest in 10 year treasuries etf

Treasury ETFs are a great way for risk-averse investors to diversify their portfolios. The iShares 7-10 Year Treasury Bond ETF (IEF) is one such example, with a focus on US Treasury bonds with remaining maturities of seven to ten years.

Treasury ETFs are a popular investment choice due to their low default risk, as the likelihood of the US government defaulting on its debt is extraordinarily low. The US government's ability to tax, borrow, or print currency to meet its debt obligations makes these ETFs a safe investment option.

The IEF ETF provides exposure to intermediate-term US Treasury bonds, allowing investors to customize their exposure to Treasuries. With an expense ratio of 0.15%, it is one of the larger Treasury ETFs with $29.8 billion in assets under management.

For investors looking to add Treasury ETFs to their portfolio, the IEF ETF is a good option to consider due to its focus on intermediate-term US Treasury bonds and its relatively large size and low expense ratio.

Characteristics Values
Name of ETF iShares 7-10 Year Treasury Bond ETF
Ticker IEF
Investment Objective To track the investment results of an index composed of U.S. Treasury bonds with remaining maturities between seven and ten years
NAV as of Nov 21, 2024 $93.50
52 WK 91.18 - 99.11
1 Day NAV Change as of Nov 21, 2024 -0.06 (-0.06%)
NAV Total Return as of Nov 21, 2024 YTD -0.06%
Expense Ratio 0.15%
AUM $29.8 billion
Issuer iShares
Interest Rate Fixed
Maturity 10 years
Liquidity High
Taxation Subject to federal income tax, but exempt from state and local income taxes

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iShares 7-10 Year Treasury Bond ETF

The iShares 7-10 Year Treasury Bond ETF (IEF) is an exchange-traded fund that offers exposure to intermediate-term US Treasury bonds with remaining maturities between seven and ten years. With an expense ratio of 0.15%, this ETF provides targeted access to a specific segment of the US Treasury market, allowing investors to customise their exposure to Treasuries.

The investment objective of the iShares 7-10 Year Treasury Bond ETF is to track the performance of an index composed of US Treasury bonds with maturities between seven and ten years. This ETF offers a hypothetical growth of $10,000, assuming reinvestment of dividends and capital gains. While the performance quoted represents past performance, it does not guarantee future results. The investment return and principal value of the ETF will fluctuate, and an investor's shares may be worth more or less than their original cost when sold or redeemed.

As of November 21, 2024, the net asset value (NAV) of the iShares 7-10 Year Treasury Bond ETF was $93.50, with a 52-week range of 91.18 - 99.11. The total net assets under management are approximately $28.594 billion, with an average volume of 11.29 million. The fund has a Bronze Morningstar Medalist Rating (effective September 30, 2024) and is rated against 38 Long Government Funds based on risk-adjusted total return as of October 31, 2024.

Investors can access iShares ETFs through online brokerage firms, and all iShares ETFs and ETPs trade commission-free online through Fidelity. Before investing, it is essential to carefully consider the fund's investment objectives, risk factors, charges, and expenses. Investing involves risk, including the possible loss of principal, and individuals should consult their financial advisors to discuss how iShares ETFs and ETPs can fit into their investment portfolios.

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Vanguard Long-Term Treasury ETF

The Vanguard Long-Term Treasury ETF (VGLT) is a popular choice for investors seeking to invest in 10-year Treasury bonds. With $13.8 billion in assets under management and an expense ratio of 0.04%, this ETF offers investors exposure to long-term U.S. Treasury bonds.

The Vanguard Long-Term Treasury ETF is an exchange-traded fund that tracks the performance of long-term U.S. Treasury bonds with maturities of 10 years or more. By investing in this ETF, individuals can gain access to a diversified portfolio of U.S. government bonds, which are considered one of the safest investment options available due to their low default risk.

Benefits of Investing in VGLT

VGLT offers several benefits to investors:

  • Safety: U.S. Treasury bonds are backed by the full faith and credit of the U.S. government, making them a safe investment choice.
  • Fixed Interest Rates: Treasury bonds offer a fixed interest rate, providing predictable interest income throughout the bond's life.
  • Liquidity: U.S. Treasuries are highly liquid and can be easily bought and sold in the secondary market.
  • Diversification: Treasury bonds can be a valuable component of a diversified portfolio, offering a safe haven during market downturns.
  • Income Generation: Treasury bonds provide periodic interest payments, making them attractive for investors seeking regular income.

How to Invest in VGLT

Investing in the Vanguard Long-Term Treasury ETF can be done through any online brokerage platform. Simply open an account with a broker that offers access to ETF trading and purchase shares of VGLT. It is important to note that, like any investment, VGLT is subject to interest rate risk and inflation risk, which can impact the market value of the bonds.

The Vanguard Long-Term Treasury ETF can be a valuable addition to a well-rounded investment portfolio. Investors often include Treasury ETFs as part of a diversified portfolio that includes a mix of asset classes, such as stocks and bonds, to balance risk and return.

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SPDR Portfolio Long Term Treasury ETF

The SPDR Portfolio Long Term Treasury ETF (SPTL) is a low-cost exchange-traded fund (ETF) that offers investors broad exposure to US Treasuries with maturities of 10 or more years. The fund seeks to provide investment results that correspond to the price and yield performance of the Bloomberg Long U.S. Treasury Index, which includes Treasury securities with maturities of 10 years or more and a minimum face value of $300 million.

As of August 2024, the ETF had assets under management (AUM) of $10.7 billion and an expense ratio of 0.03%. This places it among the top 10-year Treasury ETFs in terms of AUM. The ETF's performance is influenced by interest rate fluctuations, and it may be more sensitive to these changes compared to vehicles with shorter durations.

The SPTL ETF can be purchased and sold on major US stock exchanges, similar to stocks. Investors can use traditional stock trading techniques such as stop orders, limit orders, margin purchases, and short sales. It's important to note that brokerage commissions and ETF expenses will reduce returns.

The ETF's investments are subject to various risks, including changes in general economic conditions, market fluctuations, and the inherent risks of investment in securities markets. Geopolitical events, local or global, can also impact the fund's performance.

The fund's top holdings as of November 18, 2024, include US Treasury Bonds with varying interest rates and maturity dates.

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Schwab Long-Term US Treasury ETF

The Schwab Long-Term US Treasury ETF (SCHQ) is a straightforward, low-cost fund that offers potential tax efficiency. The fund seeks to track the performance of the Bloomberg US Long Treasury Index as closely as possible before fees and expenses.

The fund's goal is to provide investors with simple access to US Treasury securities with a remaining maturity of more than 10 years. It primarily invests in securities included in the Bloomberg US Long Treasury Index, which includes all publicly issued US Treasury securities with a remaining maturity of ten or more years, investment-grade ratings, and an outstanding face value of $300 million or more.

The Schwab Long-Term US Treasury ETF can serve as a part of a diversified portfolio, providing income from the long end of the Treasury bond yield curve. It has a low total expense ratio of 0.030%, and its fund inception date was 10/10/2019.

As of 11/22/2024, the fund had approximately $726.1 million in assets under management, making it one of the smaller options available. However, it is worth noting that this fund has a holdings diversity rating of "Good" and a typical tracking error.

Overall, the Schwab Long-Term US Treasury ETF offers investors a simple and cost-effective way to gain exposure to long-term US Treasury securities with a maturity of more than ten years.

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iShares 10-20 Year Treasury Bond ETF

The iShares 10-20 Year Treasury Bond ETF (TLH) is an exchange-traded fund that offers exposure to longer-term U.S. Treasury bonds with remaining maturities between ten and twenty years. Here's what you need to know about investing in this ETF:

Investment Objective: The fund seeks to track the investment results of an index composed of U.S. Treasury bonds with remaining maturities between ten and twenty years. This provides targeted access to a specific segment of the U.S. Treasury market, allowing investors to customize their exposure to Treasuries.

Performance: As of October 25, 2024, the fund's Net Asset Value (NAV) was $103.56, with a 52-week range of 93.75 - 111.57. The 1-day NAV change as of October 25, 2024, was -0.48 (-0.46%), and the year-to-date (YTD) NAV total return as of October 24, 2024, was -0.70%.

Fees: The expense ratio for this ETF is 0.15%.

Distributions: The fund distributes periodic dividends to investors. The most recent ex-dividend date was December 14, 2023.

Trading Information: The iShares 10-20 Year Treasury Bond ETF is traded on the NYSEArca under the ticker symbol TLH. As of January 11, 2024, the fund's total net assets were $7.798 billion, with a volume of 94.39K and a 65-day average volume of 1.44M. The day range on January 11, 2024, was 105.83 - 106.27, with a 52-week range of 93.08 - 116.93.

Pros and Cons: When considering investing in this ETF, it's important to weigh the potential benefits and drawbacks. Here are some key points to consider:

  • Safety: U.S. Treasury bonds are backed by the full faith and credit of the U.S. government, making them one of the safest investment options available.
  • Interest Rate Risk: Treasury bond prices are sensitive to changes in interest rates. If interest rates rise, the value of existing bonds can decrease, potentially resulting in capital losses if bonds are sold before maturity.
  • Inflation Risk: The fixed interest payments on Treasury bonds may not keep up with inflation, leading to a lower real return over time.
  • Liquidity: Treasury bonds are highly liquid and can be easily bought and sold in the secondary market.
  • Diversification: Treasury bonds can provide diversification to an investment portfolio, offering a safe haven during market downturns.
  • Income Generation: Treasury bonds offer periodic interest payments, providing a source of regular income for investors.

In summary, the iShares 10-20 Year Treasury Bond ETF offers investors exposure to longer-term U.S. Treasury bonds and can be a valuable addition to a well-diversified portfolio. However, it's important to consider the potential risks, such as interest rate risk and inflation risk, when making investment decisions.

A Beginner's Guide to US ETF Investing

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Frequently asked questions

The 10-year treasury yield is the interest rate at which the US government borrows money by issuing 10-year treasury notes. It is often referred to as the "10-year yield" or "10-year bond rate". The yield is expressed as an annual percentage and serves as a key benchmark for various financial markets and the broader economy.

A 10-year treasury ETF (exchange-traded fund) is a collection of treasuries with maturities of approximately 10 years. They are considered one of the safest investment options as the likelihood of the US government defaulting on its debt is extremely low. The iShares 7-10 Year Treasury Bond ETF (IEF) and the Vanguard Long-Term Treasury ETF (VGLT) are popular examples.

10-year treasury bonds can be purchased directly from the US Treasury through TreasuryDirect.gov via competitive or non-competitive bidding, with a minimum purchase of $100. They can also be bought through a bank or broker on the secondary market.

A:

Pros:

- Safety: US treasury bonds are backed by the full faith and credit of the US government, making them a safe investment option.

- Steady returns: Treasury bonds offer a fixed interest rate, providing predictable interest income.

- Liquidity: US treasuries are highly liquid and can be easily bought and sold in the secondary market.

- Diversification: They can be a valuable component of a diversified portfolio, serving as a safe haven during market downturns.

- Income generation: Treasury bonds provide regular income through periodic interest payments.

Cons:

- Low yields: 10-year treasuries offer relatively low yields compared to other investments, such as stocks or corporate bonds.

- Interest rate risk: Treasury bond prices are inversely related to interest rates, so if interest rates rise, the value of existing bonds may decrease.

- Inflation risk: The fixed interest payments may not keep up with inflation, resulting in a lower real return.

- Opportunity cost: Investing in treasuries may lead to missing out on potential returns from riskier investments.

- Long-term commitment: 10-year treasuries have a long maturity period, tying up funds for a significant duration.

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